Does it cash-flow in Tucson?

Question

Hello, everyone! First off, thank you for reading and taking the time to educate. I am considering purchasing a single-family home off of Speedway and Arcadia and am having a difficult time finding rental info about the area. It is a 3 bed/ 2 bath 1121 sqft home that I will be renovating, and, if all goes to plan, will rent it out and start my rental property portfolio.

The problem is, there are very few rentals available on the market right now (per Zillow and other websites) so I am having a difficult time determining what rents go for in this area. I have a feeling a lot of the rental market is extremely sensitive to U of A being in session (this place is 3 miles away), so i have no idea what i could fetch for rent on this place. Could you please provide approx. cap-rate and avg rents for this area? This is my first project and I am looking for cash-flow, not to flip. I would also be happy to provide details on the deal if you find it relevant. Thank you so much for your time!

Brian Mitchell · Answer

naftali nailed it with his post👍

Naftali Tolibas · Answer

Speedway / Swan area is an 'average' part of town in my opinion, but I do like that area for investing because:

1) It's a rental portion of town

2) I know I can find value add properties there

3) It's near central area, about 10-15 mins from UofA and 15-20 from downtown.

Personally, I would pay about 1350 for a remodeled 3/2 in that area. By remodeled, I mean floors, appliances etc. I'd say it's a desirable area for renters because of its central location to school, downtown, and near restaurants and shops.

Brian Mitchell · Answer

As a U of A rental to 3 student $400 to $500 per room. As a single family $1200 to $1300 stay conservative in calculations when investing to ensure cashflow

Josh Nicolson · Answer

Yeah ryan, they are moving in closer to UofA. they have built a large number of high rise apartments in the area in the last five years, which has put on a little more pressure on the surrounding area for the same students.

It's not all bad though because the downtown area is getting infilled with higher paying people/jobs, which is pushing some of that rental demand eastward.

Josh Nicolson · Answer

I would also aim for $1100-1200. Freshly remodeled, I would say $1300 might be possible but I think $1100-1200 is more reasonable.

I don't think I would consider this a "UofA area". Due to all the high rise apartments popping up. I would say the "UofA area" is contracting in geographic size (except a small sliver of area along the new rail system; which actually further contracts the areas not near the rail).

Naftali Tolibas · Answer

@Ryan McKean here’s a comp to go off of:

https://www.zillow.com/homedetails/4358-E-4th-St-TUCSON-AZ-85711/8504652_zpid/

It’s similar in sq. Ft. And it’s remodeled, and it’s got 92 saves. 1200 would be a safe number to go off of, but 1350 is a possibility seeing the demand. Also timing is key, I’m not entirely sure if you can find these numbers during October or December because May through August is a hot period for renters(they’re leases typically end during this time period). Something to note in your planning.

In my opinion 1% is the bear minimum, but of course anything above will mitigate risk. It’s also note worthy that 1% is a rule of thumb, I use it as a screening method, then go into the actual numbers of it passes that criteria.

Brian Mitchell · Answer

Hi Ryan, I looked a little closer at the area your talking about. My thoughts are it is a ways from campus and I wouldn’t rely on it being student housing. That area however is chalk full of smaller homes that I believe would be good for small family rental. I’ve found this market challenging to find better than 1% rule. That being said, if I found a deal on a 3/2, all in $120k or less I would definetely give it a good look. My very humble thoughts. My office is right in that area. Let me know if you need me to look at anything in that area for you

Naftali Tolibas · Answer

I concur with @Brian Mitchell and @Trevor Muzzy. The rental market is hot right now, my coworkers are having a difficult time finding decent places because they get snatched up so quick. Good luck and happy investing!

Ryan McKean · Answer

@Josh Nicolson when you say contracting, do you mean that students are moving closer and closer to the UofA area and thats where the demand is?

Thanks for the input on rent. It would seem 1.1-1.2k is the sweet spot according to all of you.

Does it cash-flow in Tucson?

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